Saturday, June 27, 2009

Making sausage and budgets: Budget Follies 2009

Hi everyone,

The budget remains in process, so who knows.

In the meantime, Saturday's column.

Tuning into the budget follies

Budgets, like sausage, are easier to swallow when you don’t have to watch them being made. Here are some reflections on the nutritional content of the state budget.

The remaining Republicans in Madison, apparently all children of Reagan’s Just Say No era anti-drug propaganda, are following through on their programming like good little soldiers. Rather than participate to balance out what they see as Democratic excesses – and even I’m mad about a couple of the proposed “taxes” – they’ve decided their best strategy is to mope along the sidelines and Just Say No. Like their compatriots in Washington, their political future now depends not on whether they have any good ideas – since their once sexy economic ideology has been dumped into the dustbin of history by the current economic chaos – but on the hope that life in Wisconsin will get worse. Their public contribution has taken the form of hand wringing over how those pesky Democrats are wrecking the state’s economy.

The hand-wringing has two main complaints: budget cuts and new taxes.

Cuts are scheduled for social services and state employee salaries. State employees (including yours truly) are being furloughed this year – a clever way to cut salaries without calling it a salary-cut. Our local legislators, whose salaries are exempt from the cuts, have promised to “donate” their raises to charity. It’s a noble gesture, but maybe it’d be fairer to let all state employees donate a specific percentage of their salaries to charity. That way the rest of us could get a tax-deduction for our pay cuts, too. Ahem.

Not surprisingly, new taxes are causing the most consternation among the anti-tax cult members in Madison, but most taxpayers will benefit since the newer taxes are fairer and restricted largely to those who can best afford them.

For instance: state income taxes will increase 1 percent for those earning above $300k/year and Wisconsin’s capital gains exemption, currently the highest in the nation at 60%, is being reduced to a still generous 40 percent.

We’re also hearing the wheezy old polka that Democratic tax increases are creating an anti-business climate, a claim that’s truthier, as Steve Colbert would say, than true. According to the non-partisan Tax Policy Center, Wisconsin was the 12th most taxed state in 2006. It looks pretty high until you add the blizzard of fees charged by state and local governments. Factoring fees into the tax levy drops Wisconsin to 23rd. Doesn’t look so horrible now, does it. Moreover, nearly five years ago, the Economic Policy Institute published a study that found “the availability of qualified workers, proximity to customers, and the quality of public services” all came in ahead of corporate tax breaks as factors affecting business location decisions. Maybe taxes aren’t the problem.

Some pluses: the budget triples the amount of support for angel investors and attempts to minimize the effect of cuts on the real engine of economic growth – getting Wisconsin residents the education they need to succeed in the world economy. Despite pay cuts across the university, the budget plans to keep tuition low for families earning under $60k. The UW Colleges’ tuition rates will remain lowest of all.

I do have a bone to pick, however. I’m surprised to see the Wisconsin Way (an association that includes he Wisconsin Education Association Council, the Realtors Association, and the Wisconsin Counties Association) endorsing an increased reliance on “sales and consumption taxes” to weather the current economic down turn. Sales taxes and, especially, taxes on cigarettes and gasoline are regressive – they hurt those who can afford it least. That tax burden should be shared fairly; we should never balance the budget on the backs of those least able to afford it.

The solution to future budget follies?

1) We need Pay As You Go budgeting. President Obama is calling for a return to PAYGO in Washington, why can’t we do it here?

2) We need complete transparency in the budget process. Rep. Pat Strachota has suggested the great idea of making the budget accessible online. Even with sausage flying, transparency would make it more difficult for legislators to hide pork.

3) Finally, we need to replace property taxes with a fully progressive income tax that distributes the tax burden fairly across income levels.

Actually, all that sounds pretty much like asking old time progressive Wisconsin to act like old time progressive Wisconsin. We’re great at making beer and cheese – we should be as good at making sausage.



PaulyW said...

Remove the property tax, try a flat tax, and combine it with an increase in the consumption tax. We need to capture all the $$$ in the underground economy. Drug dealers buy expensive things with their ill-gotten gains. At least we get the cut....what you think?

Anonymous said...

Two columns in a row about food - now I see in the 7/3/09 Daily News, your colleague Owen Robinson has written about food too - "No Patriots Without Potlucks". What do they say, "Imitation is the sincerest form of flattery"

Mpeterson said...

As we'll see, Owen didn't write it -- I did.

The Daily News screwed up....

What'll be interesting to see is whether anyone notices. :)